SEC Scales Up Probe Into Stock Trade Gamification

The Securities and Exchange Commission (SEC) is ramping up its attempts to look into the “gamification” that online brokerages use to draw in subscribers, according to a statement by SEC Chair Gary Gensler.

Gensler said in the statement that the regulator will be looking into how investors can be misled by the projections of how much they’ll make with those brokerages. In reality, the risk is much higher than those companies say.

The companies the SEC is looking into often use “predictive” analytics tools that are able to show users what they’d be earning under the best possible conditions, according to the statement.

After the SEC announced its intentions, shares of Robinhood, one of the more popular brokerages, fell by as much as 1% to the lows of the day, CNBC reported.

“While these new technologies can bring us greater access and product choice, they also raise questions as to whether we as investors are appropriately protected when we trade and get financial advice,” Gensler said in the statement. “… In many cases, these features may encourage investors to trade more often, invest in different products, or change their investment strategy.”

Robinhood has been a point of controversy for some time now, as it drew critiques for restricting the trading of some stocks like AMC or GameStop that had grown popular during a surge of meme stocks earlier this year. The company saw some pushback on its highly publicized initial public offering (IPO) afterward.

But the company has kept going, announcing earlier this month its purchase of Say Technologies, a communication platform, for $140 million.

Read more: Robinhood Buys Communications Platform Say Technologies for $140M

Say possesses a proxy processing technology which “helps broker-dealers give their customers seamless access to their vote” and has a Q&A portal which “lets everyday shareholders participate in events like earnings by asking and upvoting questions.”

Robinhood and Say will keep the Say proxy voting service and Q&A service.